Fashion's Dirty Laundry: Chanel

The label's reputation isn't stain-proof.

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It's one of the most recognized logos in the world: the two interlocked C's, synonymous with haute mode, luxury, prestige, and wealth. Founded by Gabrielle "CoCo" Chanel at the turn of the 20th century, the multi-billion dollar label is one of the world's most sought-after, expensive, and respected.

Then along came Carmen Colle. An ex-steelworker and social worker, Colle founded the high-end knitwear company World Tricot in the town of Lure, France, in 1989. Without any knitting, fashion, or business experience, she wanted to provide decent jobs for the many unemployed and uneducated immigrant women in the town, and she succeeded beyond expectations: by 2005, sales topped euro1.9 million.

The company is one of the many suppliers, known as "petits mains", that create the intricate hand work, like knits, feathers, and embroidery by which haute couture is known. Some of the biggest names in fashion were her clients: Christian Lacroix, Thierry Mugler, Jean-Paul Gaultier, and Chanel.

But she filed a euro5.3 million suit against Chanel -- her biggest client -- in 2005, claiming that a floral crochet pattern it used was a copy of a design she'd submitted for consideration and which the house declined.

After the two parties couldn't come to terms in court-ordered mediation in January 2006, they were back in the legal system. The following May, the court appointed an expert to examine the sample provided by World Tricot and the clothing claimed by Chanel that it had designed in-house. France has very stringent copyright laws, the first going back to 1793, that cover fashion design as works of art.

While the World Tricot case is slowly wending its way through the French legal system, the company is on the verge of bankruptcy. According to local news reports, World Tricot's orders have dried up and the firm is scrambling to stay afloat, having laid off workers and reorganizing its financing. According to Hoover's, Chanel's sales reached $1.9 billion in 2008.

Not that Colle is one to give up. She showed the first collection of her own label, Angèle Batist, in May and recently opened a store in Paris.

Actress Audrey Tautou attends the premiere of "Coco Before Chanel" at the Pacific Design Center in Los Angeles, California.

Photo by Charley Gallay/Getty Images

But the World Tricot suit hasn't been the only source of bad press for Chanel. Earlier this year, the film CoCo Before Chanel was released to audiences around the world.

A romantic biopic, the movie focused on the designer's early years, but neatly skipped over the period during World War II when Chanel spent the war in Paris, living in the Ritz Hotel and conducting an affair with a Nazi officer. More than one international news outlet took the opportunity to point this out.

The Guardian newspaper summed it up with a memorable headline, "Coco Chanel: enduring style, fairytale story -- just don't mention the Nazi lover."

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